Wednesday, September 12, 2012

North Dakota Oil Production Sets Records in July, Monthly Output Exceeds 20m Bbls. for First Time

The “Economic Miracle State” of North Dakota pumped another record amount of crude oil during the month of July at a rate of more than 674,000 barrels per day, according to data released today by the state’s Department of Mineral Resources. Oil production during the month of July exceeded 20 million barrels for the first time in state history, establishing a new record for monthly oil output. Here are some other highlights of North Dakota’s record-setting oil output in July:

1) The state’s oil production in July was 59% above a year ago, and followed annual increases of 71.1% in June and 75.5% in May.

2) North Dakota produced 62% more oil than Alaska in July, marking the fifth consecutive month that North Dakota has out-produced Alaska. The Peace Garden State surpassed Alaska’s oil production for the first time in March to become the country’s new No. 2 oil state, behind only Texas now.

3) The number of oil wells in North Dakota increased to 7,303 in July establishing a new state record for active wells. Over the last year through July, an average of almost seven new oil wells were put into production every business day, and each of those new wells is the equivalent of adding a new $8-10 million business to the state’s economy, see recent CD post for more details.

4) The amount of oil produced per active well in North Dakota increased to 2,861 barrels during the month of July, which was almost 20% above the oil output per well during July last year, and likely reflects the increased efficiency gains from advanced drilling technologies like “pad drilling” that are gaining popularity.

As a result of the state’s oil boom, North Dakota continues to lead the nation with the lowest state unemployment rate at 3% in July, and more than five percentage points below the national average of 8.1%. There were ten North Dakota counties with jobless rates below 2.0% in July, and Williams County, which is at the center of the Bakken oil boom, continues to boast the lowest county jobless rate in the country at just 0.7%. The exponential growth in North Dakota oil production has fueled exponential growth in the state’s oil and gas jobs, which have tripled in less than three years. Overall employment throughout the entire state has increased 6.8% over the last twelve months, almost five times the tepid 1.4% pace of job growth nationally during that period.

Bottom Line: July’s record-setting oil production in North Dakota continues to make it the most economically successful state in America, with record levels of employment and income growth, the lowest state jobless rate in the country, a state budget surplus of $1 billion, the lowest home foreclosure rate in the country, strong housing and construction markets, and jobless rates in ten of the state’s counties below 2.0%. North Dakota’s economic success, job creation, and energy-based prosperity is being driven by the development of the state’s vast energy resources, especially the ocean of shale oil in the state’s Bakken region. It’s an economic model that could easily spread energy prosperity elsewhere if more domestic energy resources were opened up to greater exploration and drilling for oil and natural gas.

"Also, of interest, I believe, is that the 152 New Wells only increased the output from N.Dakota by 9,448 bbl/day (62 bbl/day per new well.)

In contrast, every new well in July of 2011 added 205 bbl/day."

Doesn't mean much - especially since these numbers usually get revised upward (June was originally reported at 660K bbl/day and is now up to 664K bbl/day, for example).

And even if the numbers remained unrevised, July wouldn't be the first month where output from the additional wells was less than a previous month. In April of last year, for example, 94 additional wells came online, but total state production actually *fell* from 360,193 bbl/day to 351,254 bbl/day, so the net additional production from each new well was actually negative. You can't read too much into one month's figures.

Even if it does go dry in our life time, are we not better off and are not future generations better off having had access to this resource. Just think about how much the production curve would collapse inward without it.

Tom, it's important (at least in my hillbilly opinion) to use this period to prepare to transition to the fuels of the future.

In the 7 years prior to May, 2005 (I use May, because that's the last month for which we have Global Production Numbers) Global C+C (oil) production increased approx. 2.0% per year.

In the Seven Years since, Global C+C Production has averaged 0.2% per year.

We are on an undulating plateau. It may last another year, or another 5 years, but it Won't last forever (and, even if it did, the increasing demand out of the developing world - China, India, etal - would put us in an increasingly binding situation.)

If we don't use this last opportunity to prepare for the future, we will wake up some morning in a real fix.

That's why the Bakken, and Eagle Ford is important; it gives us just a little breathing room.

"One other thing rufus I know you keep visiting the Oil Drum for info..."

For a while I followed the peak oil debate and frequented the Drum. There, I was more on the optimistic side and recalled getting into incendiary debates with "POers." Subjects touched on include: Ghwar's steady production (a collapse in production was suppose to have happened like... four or five years ago - seriously), repeated failed forecasts of collapsing global crude production ("Ace" is notorious for this), and declining Russian production that was suppose to happen 3 years ago.

Speaking of the Drum's credibility, you may like this oldie written by an "expert" petroleum engineer in '08, who gives a dismal forecast for the Bakken's production potential (was suppose to have a short peak of 225,000 bpd).

Anyway, it the Drumsters couldn't predict a sunrise. I left the whole subject 'cause it's soo boring - it's the same regurgitated dog food that's been served the last eight years, nothing's changed on the Drum.

Now if this guy's numbers of working rigs is accurate then it seems these new drilling techniques are quite efficient...

Actually, they may be efficient but they are still very expensive to drill. And the drilling outside of the core areas is producing disappointing numbers. This is why the producers have to keep adding debt and keep showing negative cash flows even though thousands of wells have been drilled in the past few years and most of the production occurs in the first 18 months of operation.

I follow particular wells very closely. The oil companies have been taking them off-line to connect them onto gas lines, and to hold back production while getting storage and transportation resources in place.

Related article on CFO - interesting read as it imparts the importance of a clear and well developed energy policy. Clearly governments' choosing "winners and losers" negatively affects not just the US economy but the world economy.